Transcript The Political and Legal Environment

Chapter 3
Thrive in the Marketing
Environment:
The World Is Flat
Chapter Objectives
1. Understand the big picture of international
marketing
2. Share some key statistics and facts about the
world
3. Discuss why and how companies should enter
new markets overseas
4. Discuss the relevant international environments:
Economic, Competitive, Technological, Legal, and
Social-Cultural
5. Explain the strategies that a firm can use when
they enter global markets: Changing their
products and/or promotions or not
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Worldwide Demographic Trends
 Over six billion people…Eight billion worldwide by
2025 (the U.S. represents only about 5%)
 2 billion between India and China and both are growing
fast in terms of importing and exporting.
 Goods and services need to be adapted to meet needs
in developing countries. Development means people
are increasingly affluent, educated, and cosmopolitan
 Urban populations are increasing faster than rural
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The Importance of Global Marketing
 For the past 15 years, U.S. exports have grown
about 10 percent annually
 The Internet makes it possible for every
marketer to become an international marketer
 International Trade accounts for at least 25% of
U.S. GDP:
Exporting - Selling domestically produced
goods and services abroad
Importing - Purchasing foreign goods,
services, and raw materials
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Figure 3.1
North American Merchandise
Trade Flows (in Billions of Dollars)
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 Table 7.2
The World’s Most Frequently Spoken
Languages
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The U.S. as a Target for International
Marketers
The U.S. is an inviting target:
 Fairly large population with high levels of
discretionary income
 Political stability
 A generally favorable attitude toward foreign
investment and products
 A relatively stable economy
 The world’s largest importer
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Service Exports
U.S. is the world’s largest exporter of
services as well as products
Q. What are some of the largest U.S.
service exports?
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Service Exports
Over $105 billion is spent annually by foreign
nationals visiting the U.S. – “Exporting Tourism”
Financial services industry is going global via
the WWW
Entertainment is another major U.S. service
export
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Visa, and Many Firms Who
Accept It, Enjoy the Benefits
of Being
Global Marketers
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Figure 3.2
Decision Model for Entering Foreign
Markets
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Going Global
1. “Go” or “no go”
 Is it in the best interest of
the firm to remain in home
market or to go where
foreign business
opportunities exist?
2. Decide which global markets
are most attractive.
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Going Global
3. Thoroughly understand the environments of
the countries selected
4. Decide which way(s) to enter markets:
 Exporting
 Direct Investment
 Contractual agreements like franchising,
and foreign licensing
5. Decide how to adopt marketing strategies to
each foreign market – change from domestic
strategy or not?
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Analyzing the Global Marketing
Environment
 A company going global must understand local
conditions in the targeted country, including the:
Economic environment
Competitive environment
Technological environment
Political/legal environment
Sociocultural environment
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The Economic Environment:
Indicators of Economic Health
 Key economic indicators:
Gross national product (GNP):
Value of all goods and services produced by
a country’s citizens or organizations
Economic infrastructure
Quality of country’s distribution, financial, and
communications systems
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The Economic Environment: Level of
Economic Development
 Least developed country (LDC)
 Economic base is often agricultural
 Developing countries
 Economy shifts emphasis from agriculture to industry
 Developed countries
 Offer wide range of opportunities for international
marketers
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The Economic Environment:
The Business Cycle
 All economies go through periods of:
Prosperity
Recession
Recovery
Depression
Inflation
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The Economic Environment
Trade Barriers
 Tariffs are taxes levied against imported goods
 Import Quotas limit the number of units of certain
goods than can be imported for resale
 Embargos are complete bans on the import of
specified products
Dumping
The controversial practice of selling a product in a
foreign market at a price lower than what it
receives in the producer’s domestic market
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Trading Blocs (aka International Market
Agreements)
 NAFTA: Accord removing trade barriers among
Canada, Mexico, and the United States
 Brings together 415 million people with a combined
gross domestic product of $7.9 trillion (the world’s
largest “free-trade” zone)
 European Union: Comprised of 27 European countries
which also share a common currency (Euro):
http://en.wikipedia.org/wiki/Member_State_of_the_Europ
ean_Union
 MERCOSUL: Comprised of 5 full members and 5
associate members in Central and South America:
http://en.wikipedia.org/wiki/Mercosur#Full_members
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The Competitive Environment:
Analyzing the Market and Competition
 Competitive intelligence:
Gathering and analyzing publicly available
information about rivals to develop superior
marketing strategies
Collected from news media, the Internet,
and publicly available government
documents
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The Competitive Environment:
Competition in the Macroenvironment
 Competition in the macroenvironment (overall
structure of industry)
Monopoly – only one company
Oligopoly – a small # “own the market”
Monopolistic competition – many companies
offering products perceived as different
Perfect competition – no company can
influence the others
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The Technological Environment
 Technology:
Infrastructure of country (ex: cell coverage)
User abilities, preferences, inclinations
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The Political and Legal Environment:
Legal Influences on Business
Need to understand and account for:
 U.S. Laws
 The other countries’ laws
 The laws of trade between any 2 countries
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The Political and Legal Environment:
Legal Influences on Business
 Regulatory constraints on trade often restrict
the marketing of goods (quotas, tariffs)
 Also common—local content rules
A portion of a product must consist of
components supplied by industries in the
host country or economic community
 Human rights issues may limit foreign
countries business opportunities
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The Sociocultural Environment
 Key sociocultural considerations:
Demographics
Cultural values
Collectivist vs. individualistic cultures
Norms, customs, mores, and conventions
Language
Ethnocentrism:
The tendency to prefer products from one’s
own culture
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Figure 3.3
Market-Entry Strategies
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Contractual Agreements to enter foreign markets:
 Licensing - An agreement that grants foreign
marketers the right to distribute a firm’s
merchandise or to use its trademark, patent, or
process in a specified geographic area.
 Franchising - A wholesaler or retailer (the
Franchisee) agrees to make some payment and to
meet the operating requirements of a firm (the
Franchisor) in exchange for the right to use the
firm’s name and to market its goods or services.
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 Schlotzsky’s Deli
 Entering
International
Markets Through
Franchising
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How “Global” Should a Global
Marketing Strategy Be?
 Choose a marketing-mix strategy:
Standardization vs. localization
Standardization:
Offer the same products in all markets
Localization:
Offer a customized marketing mix for each
country
Once standardization or localization is chosen,
it’s time to tweak the marketing mix
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Tweaking the Marketing Mix: International
Product and Promotion Strategies
1. Straight Extension: The same product marketed in the
domestic market is introduced in the foreign market using
the same promotional strategy
2. Promotion adaptation: The same product is introduced in
a foreign market with a unique promotional strategy for the
new market
3. Product Adaptation: Product modifications are made for
the foreign market, but the same domestic promotional
strategy is used
4. Dual adaptation: Modifications of both product and
promotional strategies are used in a foreign market
5. Product Invention: The development of a new product
combined with a new promotional strategy to take
advantage of unique foreign opportunities
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Ethical Issues in Global Business
When in Rome…
Do as the Romans Do??
or
Do as you would in U.S.??
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